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posted on 16 February 2017

This Chart Reveals A Hidden Bull Market

by Greg Guenthner, Daily Reckoning

There's nothing quite like an earnings-driven comeback. Especially when you're dealing with a speculative sector that's taken a beating recently.

That's exactly what we're seeing from biotech stocks right now.

The biggest names in the industry are starting to impress investors once again. In fact, a handful of high-profile earnings beats are one of the reasons we're seeing resurging prices throughout the sector.

The positive biotech headlines just keep coming this month...

Biotech mainstay Amgen Inc. (NASDAQ:AMGN) reported that its anti-cholesterol drug successfully reduced heart attacks and beat earnings estimates. Amgen shares are up nearly 7% this month alone - and they're up an impressive 27% since the election.

Celgene Corp. (NASDAQ:CELG) is another big biotech that has slowly consolidated its post-election gains. Now its price also beginning to perk up. The company's flagship blood-cancer drug continues to churn out double-digit sales growth, MarketWatch notes.

Then there's Biogen Inc. (NASDAQ:BIIB). The company beat earnings - but gave squishy guidance for the year. Even so, shares are beginning to firm. Biogen stock hasn't posted a down day since Jan. 30th.

Add 'em all up and you get a brand new biotech bull.

What is the Income Play Rich Investors Love? (Hint: It's Tax-Free)

The major averages have shown impressive strength to start the year. But the S&P 500 is up a little less than 4.5%, compared to year-to-date gains of nearly 15% in the SPDR S&P Biotech ETF (NYSE:XBI).

This outperformance is telling. Not only have biotech stocks remained vulnerable to political attack related to the drug pricing scandals that made headlines last year - they've also had to dig out of a nasty bear market.

All the controversy from the presidential campaign (along with some ill-timed Trump tweets) added up to a rough year for the health care sector. Even after bouncing off its winter lows, the group underperformed every other major sector on the market in 2016. Just a few weeks ago, we noted that the Health Care Select Sector SPDR (NYSE:XLV) had just registered its first annual loss since 2008.

But the group has exploded out of the gate in 2017. It was the strongest sector on the market during the first trading week of the year. And even as Trump tried to talk these stocks down, they're successfully fighting out of their collective funk.

The health care carnage appears to be coming to an end. Our favorite pharma stocks have finished crashing every time a price-gouging soundbite plays on the evening news. Of course, there are no guarantees that politics won't come back into play in the world of pharma and biotech. But price action is telling us that the worst of the biotech bashing might finally be over.

Now it's rally time.

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